Pending Home Sales Index Up in October on Increased Activity in the South

Mark Lieberman

Managing Director and Senior Economist


  • National Association of Realtors’ October Pending Home Sales Index (PHSI) rose 3.5 percent from September to 109.3;
  • PHSI for September was revised down from 106.0 to 105.6;
  • October increase was just the third monthly gain this year
  • Year-year the index was DOWN 0.6 percentage points; the sixth year-year decline in the last seven months

Image result for pending home sales

With a strong boost from hurricanes, the National Association of Realtors’ Pending Home Sales Index (PHSI)  suggested 2017 won’t quite be the washout year for home sales man economists were predicting.

NAR’s PHSI rose 3.5 percent in October, the strongest increase since February. The month-month increase was exaggerated by a downward revision in the PHSI for September which went to 105.6, a decline instead of the originally reported 106.0 which was flat to August. Without the revision, the October increase would have been a still-respectable 3.1 percentage points.

Realtors continue to struggle with weak inventories. The NAR reported earlier this month the number of homes available for sale fell in October for the fifth straight month, down 3.2 percent or 60,000 to 1.8 million; a year ago there were 2.01 million homes for sale. And, the months’ supply of homes for sale in October dropped to 3.9 from 4.2 in September and 4.4 months a year ago.

The inventory was the lowest since NAR began tracking the number of homes for sale in 1999.

Part of the jump in the pending sale index came from a flurry of activity in the South as individuals displaced by hurricane Harvey and Irma went to contract for replacement homes.

The NAR index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. According to the NAR, the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. The October PHSI thus suggests a strong month for closings in December.

Also suggesting closings may pick up at year end, the Federal Open Market Committee is expected to hike the target fed funds rate when it meets December 12-13. Buyers could accelerate closing on homes to get in under the wire before mortgage rates – indirectly influenced by the fed funds rate – go up.

According to the NAR’s own “Profile of Home Buyers and Seller” released last month, homeowners typically stayed in their home for 10 years before selling (an all-time survey high). Prior to 2009, sellers consistently lived in their home for a median of six years before selling.

The index rose 7.4 percentage points in the South in October –the strongest month-month gain on record. The index rose 2.8 percentage points in the Midwest and 0.5 percentage points in the Northeast while slipping 0.7 percentage points in the West.

The South was the only region to show a year-year index gain in October, up 2.0 percentage points.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

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